On a number of occasions I have written about Protecting Yourself through Shareholders Agreements, Corporate Governance. I’d also like to add to that list “Venture Funding Documents”.

Collectively, Venture Funding Documents are legal documents which form a great starting point for seed stage financing for companies. When securing seed funding, you will generally start with what’s know as a Term Sheet, a bullet-point document outlining the material terms and conditions of the investment. “The term sheet lays out the proposed capitalization which includes number and type of shares for each shareholder and their relative ownership percentages, post-financing. It goes on to describe the liquidation preference, mechanics of conversion, how the board of directors will be determined, protective provisions, and other rights and agreements. The term sheet is not a definitive document – it just describes the basic agreement. This is the one we promote and use” (TechStars Model Seed Funding Documents).

Below are links to four difference resoources sharing term sheets and another of other legal documents relevant to companies who have secured seed funding.

Series Seed
TechStars Model Seed Funding Documents
Y Combinator Series AA Equity Financing Documents
Founders Institute Plain Preferred Term Sheet

I have also previously written about the online term sheet generator. To find it, follow this link, or click on the Hot Link (located on the rights side of the page)

2010 is still relatively young, yet I feel like I’ve done so much. At the beginning of the year I burst through the door of 2010 with all guns a blazing. I have given my every effort to raise capital. I’ve telephoned, emailed, presented to, and networked with a large number of angel investors and VC’s.

Here are my statistics so far in 2010:

• 41 Angel Groups and VC’s received my executive summary
• 7 Angel Groups and VC’s have turned me down
• 6 Angel Groups accepted me to present to their selection committee
• 3 selection committee’s accepted me to present to their members
• 2 occasions I flew to San Francisco to present to Angel Groups
• 2 investors asked me to contact them in 3 to 6 months (they aren’t in a position to invest today)

The above statistics will continue to grow while I wait to hear for those groups who have not yet responded. I also have had a number of Angel Groups confirming that I have made it past their initial phase and a member is reviewing the company information. If they like what they see it’s onto the next phase.

To explain the typical process for these angel groups: firstly, you submit your executive summary and presentation by whatever means possible. Most accept emails; mail does work, but has less chance of getting to the right person than email does. Some companies use AngelSoft, an online software for accepting deal proposals.

Angel Group’s will typically respond within 2 to 3 weeks. If they like your idea (and the information you provided them) they will either ask for more information or will ask you to present to their selection committee.

The selection committee is usually 3 to 4 professionals (accountants, lawyers, angel group organizer etc). They will listen to your pitch, ask you questions and send you on your merry way. One or two days later you will hear from the selection committee confirming whether you will present to the groups members or not. Regardless of the outcome, you will almost always get feedback on your pitch.

If you were good enough to make it past the selection committee you will be invited to present to the groups members. This is it; you now have a chance to stand before a group of investors. Before presenting to investors, I try to meet in person (or speak over the phone) with the groups organizer. I ask questions such as: how many investors will I be pitching to? What audio and visual equipment do you have? Should I bring my presentation on my computer, CD or flash? What is the format; time to talk, time to answer questions? You may also want to ask whether there are any fees to present. I feel strongly about not paying to pitch.

Before the presentation I practice, practice, practice. You only get one go at this. Even if your ideas is absolutely brilliant, you still need to convince investors that it can make money and you have enough experience and good enough team behind you to make something of your idea.

For me, it’s just a matter of waiting for the right investor to come along. I’ve had plenty of positive feedback; many members of my audience have shown excited about the company, the possibilities of it, and its huge potential. But I’m yet to find the one investor who is willing to put their money where their mouth is.

I’ve had first hand experience of the difficulties in gaining a work visa in the US. It isn’t as simple as filling out a form, getting it stamped and looking for a job. No, it’s actually quite backwards. First you need to find a job, then you apply for a visa. For those unlucky people residing in countries which aren’t listed on the visa waver program, finding a job must be done remote. That was one thing I had in my favor. Being an Australian citizen, I could travel to the US for up to 90 days to secure a job before returning home to apply for a visa.

But what about entrepreneurs wanting to relocate to the US to start a new business? Yes there is the EB-5 visa, which enables investors from other countries to get a visa in exchange for starting a business in the US with $1M in capital (or $500K for economically targeted areas) & the creation of at least 10 US jobs. That doesn’t sound like a Startup to me, more like an expansion of an existing business. My concern is for those entrepreneurs who have an idea, a business plan, a proof of concept and are looking for funding…..someone like me. The US is a huge incubator for seed capital. We’ve all heard of Silicon Valley and the success stories that rose out of Silicon Valley after receiving funding from VC’s or Angel Investors. Should seed capital within the US be limited to US companies? Doesn’t that limit progress?

I’ve been following, and have contributed my story to a cause that is growing significant momentum – StartupVisa.com

StartupVisa.com was created by Eric Ries, Dave McClure, Shervin Pishevar, Brad Feld, Paul Kedrosky, Manu Kumar, & Fred Wilson to raise awareness and change policy re: the EB-5 visa.

Under the proposed legislation, instead of the visa going to an investor, a startup company founder or entrepreneur who receives a minimum equity investment of $250,000 could qualify as an EB-5 visa recipient. At least $100,000 would have to come from a sponsoring US investing entity.

Today StartupVisa.com announced Senators John Kerry (D-MA) & Richard Lugar (R-IN) today introduced The Startup Visa Act in Washington.

The full text of the proposed legislation is here.

This new legislation is also supported by signatures from over 100 US venture capital and angel investors.

Here’s a 2 minute video illustrating the need to open the US up to external entrepreneurs.

To get behind the cause you can write a letter to Congress in support of Startup Visa in about 30 seconds without ever leaving this site. StartupVisa.com will collect and deliver the messages to the White House and Congress on thier trip to Washington DC March 3-6. Click on the following link:

If you are a start-up looking for capital, or an entrepreneur that will one day run with that great idea, then here are 10 blogs that are an absolute must. If you haven’t already, set up an RSS reader and subscribe to these blogs.

1. A VC – Fred Wilson is a Managing Partner of two venture capital firms, Flatiron Partners and Union Square Ventures and has been a VC for 19 years. A VC offers a great insight of how a VC thinks and acts. A must for anyone wanting to approach a VC to finance their start-up.
2. Blogtrepreneur – Not an easy name to say three times fast, however this site offers a wide range of information for the every day entrepreneur. The authors are two young entrepreneurs who founded YoungEntrepreneur.com and pioneered a method for improving the profitability of under-performing businesses using a unique ‘bottom line’ program. For entrepreneurs, this blog is very easy to relate to and offers very useful advice in many areas of business and entrepreneurship.
3. Feld Thoughts – Another VC with a wealth of experience. Brad Feld has been an early stage investor and entrepreneur for over 20 years, and invests in a number of very interesting and ground breaking companies. Brad is very receptive to cold emails and is always willing to help out newbie entrepreneurs
4. How to Change the World – Guy Kawasaki is just one of those guys who has been there and done that. Very easy to relate to, Guy offers advice on just about everything; from tweeting to pitching and presenting.
5. VC Deal Lawyer – I have always enjoyed this site, and maybe I’m bias because I’ve spoken with the author Chris McDemus on numerous occasions. If you are involved in a start-up or about to take the plunge I recommend you dig deep into Chris’ blog to get a good understanding of the legal side of venture capital.
6. Quick Sprout – Neil Patel is the co-founder of 2 Internet companies: Crazy Egg, and KISSmetrics. Neil himself admits he has had a roller coaster of a life, making millions of dollars in one venture only to lose it all on the next. For me advise through experience is the best advice of all.
7. Inc.com – A collaboration of numerous authors, this blog offers a vast array of information for the entrepreneur. Here are just a few topics discussed on the site: Start-Up, Running a Business, Finance, Leadership, Sales and Marketing, Technology and Innovation. Keeping track of their posts is a job in itself, posting half-a-dozen stories each day. Unfortunately you have to sit through an advert before reading each post, but other then that, this blog offers it all.
8. Seth’s Blog – Seth Godin is a marketing and branding wizz, and that goes for marketing his own books (10 and counting) including The Dip – a Business Week and New York Times bestseller. A highlight of this blog is Permission Marketing. Godin explained how to turn strangers into friends and friends into customers. Learn how to marketing to people who have shown an interest in your product/service.
9. Get Elastic – If your company operates online, and in particular sells online products, this site will offer a wealth of information. Each post provides practical examples of how to make your product sell. From site layout, to product branding this blog may just help your product reach the tipping point.
10. Blog Maverick – Author Mark Cuban is the owner of the Dallas Mavericks (NBA basketball team) and Chairman of HDNet (HDTV cable network). Yes the site talks a lot about sport (good oh!), but from a professional business prospective, so it makes sense. Looking deeper into the blog you will find a wealth of information from the viewpoint of Mark Cuban.

Recently I was invited to present to the selection committee of an Angel Group. The role of the selection committee is to assess companies and approve/dissapprove them to present in front of their members.

The presentation went well, enthousiasm and excitement was generated amongst my audience and I successfully passed the test – our company has been invited to present to the Angel Groups members. Good oh!!!! Then comes the paperwork for me to fill out: company name (no problem), company description (easy), credit card details……. huh, for what?

Scroll down the form and read “The fee to present at each of its locations/chapters is $1,500 USD per location/chapter…..” What the hell?

The thought that a cash-strapped company has to pay to pitch to rich individuals just doesn’t sit well with me. Quite frankly I think it stinks. But am I alone on this? Apparently not. I did some research on the topic and found some interesting reports on the subject.

Starting with the disclaimer “written with boiling blood”, Jason Calacanis writes a very passionate article addressing the subject and calls for all Angel Groups charging startups to pitch to change their ways or be crushed. Have a read of Jason’s article Why startups shouldn’t have to pay to pitch angel investors and join the movement.

One of my favorite VC’s Brad Feld agrees that Angel Groups should not be charging startups to pitch. In his post An Angel Investor Group Move that Makes me Vomit Feld says that “the cost of this should be born by the angel investors that are members of the group, not by the entrepreneurs….It’s just completely backwards in my opinion.”

There are many more opinions out there and across the board most agree that Angel Groups should not charge startups to pitch. If these groups feel the need to cover costs for catering, room high and AV equipment rental I would probably wear a nominal fee of $300 or less, but any more would see me walk away from the group. The Angel Capital Association (an association that assists Angel Groups with events, education and resources) has released Guidelines on Charging Entrepreneurs Fees for Applications and Presentations and recommends that Angel Groups fees should be no more than a few hundred dollars for applications and no more than $500 for presentations. Sadly, a high number of Angel Groups ignore these recommendations and charge startups upward of $5,000 to pitch.

Angel Groups excuse for charging this pitching fee come in many forms. Some of the popular excuses are a) to weed out the not-so-serious companies and b) cover the costs of doing business.

My thought on the first excuse are that companies with great ideas or products will walk away from groups that charge to pitch. Great ideas attract investors and smart entrepreneurs know that with patience the money will come. That said, Angel Groups that charge to pitch will only attract poor ideas or naive entrepreneurs, both of which will be poor investments for Angel Groups. You therefore have to ask yourself what quality of investor is attracted to Angel Groups that charge startups to pitch?

To the second excuse I ask “Isn’t the cost of doing business factored into the large returns you receive?” Sensible angel groups have enough trouble finding good prospects, and members pay for the chance to access those prospects. Are fees paid by members insufficient to cover the cost of doing business? If so, maybe those groups charging entrepreneurs fees need to revisit their business model.

Not all Angel Groups disclose their fees upfront (that was the case with the group I presented to last week), so before you agree to progress with the Angel Group ask the question “do you charge companies to pitch?”.

In the later stages of 2009 I connected with an angel group: Band of Angels. Their deal coordinator put me onto a presentation where Dr. Ian Sobieski (a founder and managing director of the Band of Angels Fund) sits as a panel members for the presentation Funding Your Dream.

The presentation offers great advice for any entrepreneur seeking seed capital. A range of topics are covered including the mistakes entrepreneurs commonly make when presenting, the average number of deals each VC company makes and a very important topic for start-ups seeking capital: how to connect with investors.

The host asked the panel one question that I was very interested in: how many cold calls result in successful deals? Two panel members answered “Nil”, two panel members answered “One”, and the last panel member answered “25%”. That’s a very low chance of getting finance without being referred to an Angel fund or VC. That does not mean one should give up. On the contrary, it means entrepreneurs without reference need to produce a rock solid business plan and presentation. They also need to network like crazy in order to get that reference.

When panel member Susan Mason was asked what are the mistakes entrepreneurs make when presenting, she responded by saying “the most important thing is to attract our attention. We have attention deficit disorder; most VC’s do.” Susan pointed out that entrepreneurs need to start off a presentation by grabbing the VC’s attention. This should be done by explaining briefly how your business works and how your business serves a need in the market place. The panel agreed that a successful deal will involve several meetings, and their advice was to hold off on the technical detail until later meetings. The initial meeting should inspire and encourage your audience that your product is needed by consumers.

Check out the video – Funding Your Dream. It runs for about an hour, but it is set up in chapters so you can skip to questions that you find interesting.

This morning I came across a very interesting and insightful article written by Joseph G. Hadzima, Jr. – Senior Lecturer, MIT Sloan School of Management. In fact, following on from this one article I found an excellent resource for entrepreneurs.

Within his article, entitled “Consideration for Founders: Issues in Structuring Relationships Among Members of the Founding Team”, Joseph talks about the problems that commonly arise between the founding members of a start-up and throughout the article he offers simple and practical advise to solve these problems. Here is his opening paragraph:

“There are so many things which Founders have to worry about and do in launching a new venture- financing, people, customers etc. All of these are important but the reality is that most ventures fail because of people issues and are really a failure of the relationships among the team members. Teams come together around an interesting or exciting idea or opportunity and tend to get swept up in the idea. They often don’t talk about their shared aspirations, vision and what they want to get out of the venture. The venture gets launched without these discussions and then problems surface “Big Time” down the road when these undiscussed topics collide.”

Joseph Hadzima raises a great point about the founders initial ownership. Like most start-ups, each founder brings along a special skill, be it management ability, technical knowledge, experience in the market or a cash investment. Joseph goes on to provide an example: “assume that Bill, Sam and Mary are the founders and their understanding is that Bill will invest $20,000, Sam will work on marketing and financing and Mary will develop the product. They agree that each will receive 1/3 of the stock. In this situation, Bill has done everything he promised once he pays his $20,000. The founders should consider what happens if Sam or Mary don’t do what they promised.”

Joseph and I agree on the solution to the above example: that being to “vest” the stock of the founders. “For example, the founders might agree to a calendar vesting schedule (e.g., straight line vesting over 5 years) so that if a founder leaves the company after one year of employment or involvement then he or she would be entitled to keep only 20% of his or her stock.”

To read the full article, click here.

I encourage you to visit Joseph Hazima’s website. I’ve enjoyed his articles so much that I’ve added them to this blogs Hot Links. If you want a quick path to Joseph Hazsima’s library of articles, click here.